LSE Agrees to Pay 15 Euros a Share for LCH.Clearnet

By Nandini Sukumar -
Dec 24, 2012

London Stock Exchange Group Plc (LSE)
provisionally agreed to pay 15 euros a share for a majority
stake in LCH.Clearnet Group Ltd. as the two companies extended
the deadline for takeover negotiations until Jan. 31.

The new bid comprises 14 euros in cash payable upon
completion of the deal and 1 euro to be paid in September 2017,
the companies said in a Regulatory News Service statement today.
Europe’s oldest independent bourse originally offered 20 euros a
share for as much as 60 percent of LCH.Clearnet, valuing the
clearinghouse at 813 million euros ($1.07 billion).

LSE cut the bid to 14 euros a share amid concern European
regulations will force LCH.Clearnet to boost capital by 300
million euros to 375 million euros, three people with knowledge
of the matter said last week. The European Securities and
Markets Authority has proposed that 95 percent of a
clearinghouse’s cash deposits placed with financial institutions
must be collateralized with debt instruments meeting certain
conditions of liquidity and credit risk, LSE said in September.

“The provisionally agreed offer price is based on an
assumption of a 300 million-euro capital raise,” according to
today’s statement. “The price is subject to adjustment
depending on the precise quantum of the capital raise which
LCH.Clearnet is currently discussing with regulators.”

Clearinghouses operate as central counterparties for every
buy and sell order executed by their members, who post
collateral, reducing the threat from a trader’s default. They
have become more attractive as regulators seek more central
processing of derivatives transactions.